The Korea Herald


Korean economy expected to grow by 2.1% in 2024: Hana Institute

By Song Seung-hyun

Published : Oct. 12, 2023 - 16:38

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Hana Financial Group's headquarters in Seoul (Hana Financial Group) Hana Financial Group's headquarters in Seoul (Hana Financial Group)

South Korea's economy is expected to achieve a growth rate of 2.1 percent in 2024, according to the recent report titled "2024 Economic and Financial Market Outlook" by Hana Bank's research institution, the Hana Institute of Finance.

“Considering the base effect of the sharp slowdown in 2023, the growth momentum is not strong,” Oh Hyun-hee, a researcher at the Hana Institute of Finance said.

The institute forecasts an annual economic growth rate of 1.3 percent for 2023.

The Hana Institute of Finance attributes this improvement in the economic outlook to factors such as the expected disinflation trend in 2024, the end of major countries' interest rate hike cycles, and an improvement in the manufacturing industry.

It expects personal spending growth to be around 2.2 percent in 2024, a slight improvement from 2 percent in 2023.

It also believes that improved consumer sentiment and stable prices will contribute to continued growth in personal consumption next year. Howver, it also took into account factors such as weakened employment and wage growth due to the easing of pent-up demand that peaked after the COVID-19 pandemic.

Exports are expected to rebound from a decline of 8 percent in 2023 to 8.2 percent in 2024, according to the insitute.

The institute said that this is mainly due to the recovery of goods and manufacturing demand in the global market, as well as semiconductor production cuts which led to price rises.

The research institute also predicts a decrease in the consumer price index, with inflation slowing down from 3.6 percent this year to 2.6 percent next year.

It pointed out that while a stabilized exchange rate between the Korean won and the US dollar and decreased service prices will contribute to a drop in the consumer price index, uncertainty remains due to factors like volatile raw material supplies.

The institute expects that the current level of the base interest rate, which stands at 3.5 percent, will be maintained until the first half of 2024 due to the remaining inflation risk and the burden of increase in household debt.

It expects that the interest rate will be lowered pending the US Federal Reserve's decision in the second half of 2024, when inflation stabilizes at the 2 percent level.